Pa. budget deficit: Is it time to end tax credits for Hollywood?

BRAD BUMSTED and JASON CATO

Monday

Feb 28, 2011 at 6:32 PMFeb 28, 2011 at 6:35 PM

Faced with a $4 billion state deficit, Gov. Tom Corbett will recommend next week whether state lawmakers should keep or cut $60 million used to lure motion picture productions to Pennsylvania. Corbett is reviewing all expenditures in the $28 billion budget, said Kelli Roberts, a deputy press secretary.

HARRISBURG (AP) — Faced with a $4 billion state deficit, Gov. Tom Corbett will recommend next week whether state lawmakers should keep or cut $60 million used to lure motion picture productions to Pennsylvania.

Corbett is reviewing all expenditures in the $28 billion budget, said Kelli Roberts, a deputy press secretary. But Roberts won't say whether Corbett will propose maintaining or eliminating tax credits for the film industry when he gives his budget address on March 8.

"I can't comment on that," she said.

Last year, 43 states and the District of Columbia offered tax subsidies for film and television productions, reported the Center on Budget and Policy Priorities, a Washington-based policy group.

Pennsylvania is one of a few states considering reducing or eliminating the film tax credit program, said Vans Stevenson, senior vice president of state government affairs for the Motion Picture Association of America.

Roberts said Corbett hasn't made any proposal to reduce the program.

Under the program begun in 2004 and expanded three years later under Democratic Gov. Ed Rendell, filmmakers can apply 25 percent of production expenses in Pennsylvania to offset other state taxes, provided at least 60 percent of total production expenses occurred in the state.

Over a 50-year span, 149 movies and TV shows were made in the Pittsburgh region, according to the film office. Forty of those projects were made in the past four years.

Supporters of the tax credit program say it substantially increased the number of films made in the Pittsburgh area and pumped $280 million into the region's economy since 2007. Dawn Keezer, director of the Pittsburgh Film Office, contends some — if not all — of five film companies considering Pittsburgh would move elsewhere if the tax credit program isn't approved.

"I definitely feel that the film tax credit is worth the money in terms of economic spinoff," said Senate Minority Leader Jay Costa, D-Forest Hills.

Critics dispute the economic and employment gains, question the value in light of billions of dollars of other likely budget cuts, and say it's a selective tax break for one industry.

"Given the state's fiscal condition, I can't imagine spending money on this. I'd be surprised if (Corbett) continues it," said Sen. Pat Vance, R-Cumberland County. Vance said she doubts companies would stop making movies in Pennsylvania.

In Michigan, newly elected Gov. Rick Snyder proposed capping film tax breaks at $25 million as part of his plan to cover a $1.8 billion budget deficit. "The Avengers," a blockbuster superhero film, ditched Michigan soon after the announcement.

Last year, Michigan awarded $163 million in incentives and paid out $60 million in film credits, according to the Michigan Film Office.

Michigan Sen. Rick Jones, a Republican, said he supports scaling film tax credits back but does not want them eliminated.

"I'm hoping (Snyder) doesn't want to completely get rid of them because I believe some residual dollars come into the state from successful movies," he said. "It's not just the initial money you make from construction, dining, hotels and things. There's all sorts of money that comes in."

Accounting firm Ernst & Young released a study last month that reported Michigan's incentives generate almost $6 in economic activity for each dollar granted in film tax breaks.

However, the Michigan Senate Fiscal Agency released a report in September stating film incentives generate only a dime in tax money for every dollar paid out.

After serving as the backdrop for back-to-back Academy Award Best Picture nominees "Winter's Bone" and "Up in the Air," Missouri is considering scrapping its state film office and film tax credit program.

The Missouri Tax Credit Review Commission, a bipartisan panel convened by Gov. Jay Nixon, in November recommended eliminating the state's $4.5 million film tax credit program.

"This tax credit serves too narrow of an industry and fails to provide a positive return on investment to the state," the commission's report said.

Jerry Jones, director of the Missouri Film Office, said he understands administrations are scrutinizing film incentive programs and said it is easy for people to become confused with conflicting reports.

Most pro-film industry reports measure the overall economic impact film production budgets have on a community and state, from filming costs to hotel expenditures and restaurant tabs. Those that minimize the industry's impact often focus on the direct tax revenue recovered from production expenditures.

Canada started offering film tax credits to land projects in the 1990s. When Missouri offered $1 million in film incentives in 1999, it became the first state to do so, Jones said.

New Mexico and Louisiana followed in 2002 by offering uncapped incentives to lure film and TV projects.

"In order to be competitive, everybody had to have a program," Jones said.

The Center on Budget and Policy Priorities released a report in November suggesting states reduce or eliminate such programs.

"Like a Hollywood fantasy, claims that tax subsidies for film and TV productions — which nearly every state has adopted in recent years — are cost-effective tools of job and income creation are more fiction than fact," the report said. "In the harsh light of reality, film subsidies offer little bang for the buck."

In fiscal year 2010, states spent about $1.5 billion collectively to subsidize film and TV projects. The center argues that money could be better spent on education, public safety or infrastructure.

"We're hopeful the majority of these (incentives) will remain in place, particularly in Pennsylvania," said Stevenson, with the motion picture association. "If they don't, business will not be as robust as it has been. It will pale in comparison to what is going on now."

"The Dark Knight Rises" and other feature films might leave Pittsburgh on the cutting room floor if the state continues to delay approving film tax credit applications, Dawn Keezer fears.

"We've been operating under a freeze for three weeks," the head of the Pittsburgh Film Office said, rejecting claims by Gov. Tom Corbett's office that applications are being approved as normal.

Nearly $50 million in film tax credits were approved under former Gov. Ed Rendell's administration. No new projects have been approved during Corbett's six weeks in office, Keezer said.

The state's film tax credit program is capped at $60 million this fiscal year, leaving about $11 million in the budget for such projects, Keezer said.

Several film tax credit applications are awaiting approval by the state Department of Community and Economic Development, Keezer said.

The union plans a rally in support of the film tax credit on Saturday at Island Studios in McKees Rocks.

Industry insiders have said "The Dark Knight Rises," the next Batman film from Warner Bros., is among films considering Pittsburgh. Others include a Lionsgate project and Walden Media's "Shall I Rise."

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